Disappointing Earnings News Weigh on US Stocks

By Investors Hub

The major U.S. index futures are pointing to a modestly lower opening on Wednesday, with stocks likely to extend the pullback seen late in the previous session.

A negative reaction to earnings news from big-name companies like Boeing (BA) and Caterpillar (CAT) may contribute to initial weakness on Wall Street.

Boeing and Caterpillar both reported weaker than expected third quarter earnings, with Caterpillar also cutting its full-year outlook due to weak demand for construction and mining equipment.

Disappointing guidance from Texas Instruments (TXN) may also weigh on tech stocks, as the chipmaker cited the impact of ongoing uncertainty about trade.

Overall trading activity may be somewhat subdued, however, with a lack of major U.S. economic data keeping some traders on the sidelines.

Traders may look ahead to the release of reports on durable goods orders, new home sales, and weekly jobless claims on Thursday.

Further developments on the Brexit and U.S.-China trade deal fronts could also have a significant effect on the markets as the day progresses.

Meanwhile, Ford (F), Microsoft (MSFT), and Tesla (TSLA) are among the companies due to report their quarterly results after the close of trading.

Stocks turned in a lackluster performance throughout much of the trading day Tuesday but came under pressure in the latter part of the session. The major averages all pulled back into negative territory, with the tech-heavy Nasdaq showing a notable drop.

After ending the previous session at its best closing level in a month, the Nasdaq slid 58.69 points or 0.7 percent to 8,104.30. The S&P 500 also pulled back off a one-month closing high, falling 10.73 points or 0.4 percent to 2,995.99, while the Dow dipped 39.54 points or 0.2 percent to 26,788.10.

The late-day pullback may have reflected renewed uncertainty about Brexit after U.K. lawmakers voted to move forward with legislation related to Britain’s withdrawal from the European Union but then voted against a shortened time frame to review the bill.

Members of Parliament narrowly voted against the limited time frame, which would have provided just three days to evaluate the legislation.

The vote suggests lawmakers will not meet an October 31st deadline, setting the stage for another extension by the EU to avoid a no-deal Brexit.

The choppy trading seen earlier in the session came as traders digested the latest batch of earnings news, with mixed results from some big-name companies pulling the markets in opposite directions.

Shares of McDonald’s (MCD) came under pressure after the fast food giant reported third quarter results that missed analyst estimates on both the top and bottom lines.

Delivery giant UPS (UPS) also saw notable weakness after reporting third quarter earnings that beat expectations but on weaker than expected sales.

Meanwhile, shares of Procter & Gamble (PG) moved notably higher after the consumer products giant reported better than expected fiscal first quarter results.

Fellow Dow component United Technologies (UTX) also moved to the upside after reporting third quarter results that beat estimates and raising its full-year guidance.

On the U.S. economic front, the National Association of Realtors released a report showing existing home sales pulled back by much more than anticipated in the month of September.

NAR said existing home sales plunged by 2.2 percent to an annual rate of 5.38 million in September after jumping by 1.5 percent to an upwardly revised 5.50 million in August.

Economists had expected existing home sales to drop by 0.7 percent to a rate of 5.45 million from the 5.49 million originally reported for the previous month.

Despite the pullback by the broader markets, most of the major sectors ended the day showing only modest moves.

Software stocks showed a significant move to the downside, however, with the Dow Jones U.S. Software Index slumping by 1.8 percent.

The index continued to give back ground after ending last Tuesday’s trading at it best closing level in well over two months.

On the other hand, energy stocks moved notably higher, benefiting from a sharp increase by the price of crude oil.

Reflecting the strength in the energy sector, the Philadelphia Oil Service Index surged up by 2.4 percent and the NYSE Arca Oil Index and the NYSE Arca Natural Gas Index rose by 1.4 percent and 1.2 percent, respectively.